Additionally, paste this code immediately after the opening tag:
Rule Change Updates

New FINRA Rule 2273 Regarding Recruitment Practices and Account Transfers

When brokers change firms, their customers are often encouraged to follow because of their existing relationship.  Customers may not fully understand the financial incentives that influenced the broker’s decision to move, the costs for moving assets, and the changes in service levels that are part of these transitions. To ensure customers understand consequences and potential costs of changing firms to follow their brokers, FINRA’s new rule 2273 requires delivery of a FINRA-created educational communication.  Starting on November 11, 2016, this communication must be delivered to customers by the firm that recruited the registered representative.

Key points of this communication include the following:

  • Financial incentives received by the broker could create conflicts of interest and encourages customers to ask why the broker changed firms.
  • Financial incentives could be based on assets the broker brings to the firm, the sale of in-house products, and total assets under management.
  • There may be costs, new fees, changes in available services and potential tax consequences that customers should understand before transferring accounts.
  • Certain assets may not be transferable, which may subject customers to additional cost implications.

Timing of the Communication

The new firm – the recruiting firm – is required to deliver this educational communication.  It must be supplied at the time of the first contact with a former customer regarding transferring assets, in paper or electronically.

  • If the contact is in writing or electronic, the communication must be included with this contact.
  • If the contact is made by phone or in conversation, the communication must be delivered within 3 business days.
  • When a former customer transfers assets to an account assigned to a new representative without individual contact from that representative, the communication must be delivered with the account transfer approval documentation. The delivery of the educational communication under these circumstances is required for a period of three months following the representative’s association with the new firm.

To read more about new Rule 2273, review FINRA’s Notice.

FINRA exams may include questions on these changes after the November effective date. Our materials and classes will be updated to reflect this change.

Thanks for checking for Rule Updates from Knopman Marks Financial Training!

Marcia Larson is Vice President, Faculty, at Knopman Marks Financial Training, New York, NY. She has extensive experience in financial licensing and regulatory training, having authored, developed and presented courseware for numerous securities and insurance exam preparation and continuing education and compliance programs. Before joining Knopman Marks, Marcia was Director of Annuity Products and Business Development at CUNA Mutual Group, where she developed and marketed industry-leading annuity products and retirement solutions and implemented distribution relationships. She was previously VP, Securities Products for Kaplan Financial, managing securities training products and subsequently, international training and businesses development. Marcia has trained thousands of financial industry exam candidates throughout their careers, and also college students as an adjunct professor. Marcia was a summa cum laude graduate of Wartburg College with degrees in Business Administration and Piano Performance. Marcia also holds the designations of Chartered Financial Consultant® (ChFC®), Chartered Life Underwriter (CLU®), Certified Employee Benefit Specialist (CEBS), and Fellow Life Management Institute™ (FLMI®). She currently teaches the SIE, Series 6, 7, 24, 50, 52, 63, 65, and 66 exams.